Preliminary Outlook and Discussion: Ontario Supply/Demand Balance to 2035 Prepared for discussion with the IESO Stakeholder Advisory Committee

March 23, 2016

Purpose

• Describe the planning process envisioned by Bill 135

• Provide some planning context • Invite your input

2

Bill 135 planning process

IESO Technical Report “Ontario Planning Outlook”

Bill 135 “Energy Statute Law Amendment Act, 2015”

Government’s Long-Term Energy Plan

IESO Implementation Plan

3

The IESO is beginning work on a new planning advisory product: the “Ontario Planning Outlook” (2016). The Outlook will provide planning context for policy makers and industry stakeholders and serve as an early input into the government’s Long-Term Energy Plan development process. Elements of the Planning Outlook: A. Review

B. Outlook

C. Discussion

D. Synthesis

E. Guidance for Action

• “Where are we

• “Where are we going/what is the path we are currently on?”

• “What are some of

• “What do we make of all of this/how do we interpret this/what does it/could it mean?”

• “What do we do with this information?”

and how did we get here?”

• Review of historical trends 2005 – 2014

• Deterministic, “Status quo” outlook

the important considerations?”

• Investigation of relevant issues, trends, uncertainties, opportunities and risks

• Development of integrated themes and insights

• Advice, identification of key indicators and trigger points

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Summary • The projection for long-term electricity demand growth is effectively flat: demand growth is expected to be offset by conservation savings • Ontario is adequately supplied and will remain adequate for the foreseeable future - Requirements for additional supply are generally not expected to emerge until at least the mid-to-late 2020s

• The timing and extent of eventual need for additional supply is a moving target • Operational and regional considerations may drive focus in the meantime

Analysis is underway, the values in the following slides should be treated as indicative for now

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Ontario has undergone net growth in electricity supply in recent years 45 40 +2

+1

+1

Refurbished Nuclear

New Hydro Resources

New Demand Response Capacity

Installed Capacity (GW)

35 +5

30 -6

+5

Coal Shutdown

Non-Hydro Renewables

25 20 15 10 5 0 2005

New Natural Gas Resources

2014

6

Ontario electricity demand has not grown within the same period Peak Demand (MW)

27,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2008

2009

2010

2011

2012

2013

2014

26,000 25,000 24,000 23,000 22,000 21,000

Ontario Demand IESO Grid Demand

20,000

Energy Demand (TWh)

160 155 150 145 140

135 130

Ontario Demand IESO Grid Demand

125 2005

2006

2007

2014 7

Rising capacity margins have been the result, particularly in the winter 7,000

6,000

7,000

Resources Above Requirement (MW, seasonal weather normal)

6,000

5,000

5,000

4,000

4,000

3,000

3,000

2,000

2,000

1,000

Summer

1,000

Winter

-

Summer 2009

Summer 2010, Winter 2009/10

Summer 2011, Winter 2010/11

Summer 2012, Winter2011/12

Summer 2013, Winter 2012/13

Summer 2014, Winter 2013/14

8

Ontario’s electricity production mix has evolved over the past decade: coal-fired production has been replaced by production from natural gas-fired, nuclear, and renewable sources. About 90% of Ontario’s electricity production now comes from non-fossil sources.

(includes exports)

Annual Ontario Energy Production (TWh)

180 160 140 120 100

80 60 40 20 0 2005

2006 Nuclear

2007

2008

2009

Coal

Oil & Gas

Hydro

2010

2011

Non Hydro Renewables

2012

2013

2014

Other

9

Meanwhile, Carbon dioxide emissions from electricity generation in Ontario have declined by over 80%

CO2 Emissions (megatonnes)

40 35 30 25

20 15 10 5 0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

10

Recent investments in Ontario’s transmission infrastructure have supported objectives related to the elimination of coal-fired generation, improving reliability, enhancing interconnections with neighbouring jurisdictions and connecting renewable generation. Major Ontario transmission investments between 2005 and 2015 are summarized below. Legend 1 Parkway TS 2 North Sault Ste. Marie Reinforcement 3 Local Generation 4 Hydro Quebec Interconnection 5 North-South Series Compensation and Northeast SVC 6 Nanticoke and Kitchener Area SVCs 7 Bruce to Milton 8 Lambton to Longwood 9 Station Improvements 10 Niagara Area Reinforcement

11

Ontario’s total cost of electricity service grew by about 55% between 2004 and 2014. Generation was the largest driver. 20 $0.3

18

$1.1

$0.3

$0.1

$0.0

16

Billions (Nominal)

12 10

8

$3.4

$5.0

14

$1.6 $0.3

$1.0 $0.8 $2.3 $1.3

6 4

$1.0 $0.9

$11.8 $6.7

2 0

2004

Generation

Generation

Conservation

Conservation

Transmission

Distribution

Transmission

Wholesale Charges

Distribution

DRC

Regulation

2014

DRC

12

More supply is on the way: some is contractually committed but not yet in service, some has been directed but has not yet been secured 45

Installed Capacity at Year-End (GW)

40

Contracts Reaching Term

35 30

Directed

25

Committed

20

15 10

Existing

5 0 2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

13

2035

Long-term net demand growth will remain moderate as conservation savings offset projected economic growth 35,000 Historical

Projected

240

30,000

Peak Demand

Conservation

220

Peak Demand (MW)

200 20,000

180 15,000

Energy Consumption

Energy Consumption (TWh)

25,000

Conservation

160

10,000

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

120

2003

0

2002

140

2001

5,000

Electrification assumptions in the reference demand forecast: • • •

Continuation of current trend of a modest decline in electric fuel share for space and water heating attributable to low natural gas costs and expansion of gas systems Transit lines that are scheduled to be electrified and have committed funding 50% annual increase in EV sales over next 5 to 10 years, sales levels stabilize thereafter; 600,000 EVs on the road by 2035

14

Effort will be required to meet conservation targets established in the 2013 Long-Term Energy Plan

Planned savings from future programs & Codes and Standards

15 NOTE: Savings at the generator level, which accounts for transmission and distribution losses.

Potential impact on Ontario’s energy demand

• What charging energy demand would be if some of today’s passenger vehicles were EV. • One million EVs would require about 3 TWh electricity each year, representing 2% of Ontario’s grid demand. Number of EVs EV registered in Ontario by December 2015 5% of today's passenger v ehicles were EV 13% of today's passenger v ehicles were EV 20% of today's passenger v ehicles were EV 100% of today's passenger v ehicles were EV

5,400 385,500 1,002,300 1,542,000 7,710,000

Annual EV Percentage of charging energy Ontario's grid demand (GWh) energy demand 18 0.01% 1,180 0.9% 3,068 2.2% 4,720 3.4% 23,600 17%

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Potential impact on Ontario’s peak demand •

Peak impact under different scenarios to charge one million EVs Evenly distributed 24/7

Charger type

All types of chargers

Charging pattern

Throughout a day

Daily load profile

20% lev el-1 60% lev el-2 20% lev el-3 20% daytime 30% ev ening 50% night

10% lev el-1 50% lev el-2 40% lev el-3 40% daytime 50% ev ening 10% night

10%

10%

9%

9%

9%

8%

8%

8%

7%

7%

7%

6%

6%

6%

5%

5%

5%

4%

4%

4%

3%

3%

3%

2%

2%

2%

1%

1%

1%

0%

0%

I mpact on grid peak demand (MW)

0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

342

328

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

496

Charging scenarios vary significantly, affected by: – – –

•

Convenience dominant with minimal load management

10%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

•

Effective load management with some convenience

Time of charging Type of charger Status of battery

It will be important to maintain tools to assist in managing the timing of charging loads.

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Electrification of Transit Expected in service date 2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Beyond 2025

GO Rail system (GTA) Hamilton LRT (Hamilton) ION LRT (Waterloo / Kitchener)

Stage 1

Stage 2

Hurontario - Main LRT (Mississauga) Confederation Line LRT (Ottawa)

Stage 1 Stage 1

Stage 2 Stage 2

Eglinton crosstown (Toronto) Sheppard east (Toronto) Finch west (Toronto)

•

•

•

Reference case forecast (blue in the chart) includes projects under construction or have funding committed. High case (green in the chart) also includes stage 2 projects being planned. Challenge to estimate electricity demand as details are not available for most projects. Power needs highly depend on service level (eg. service frequency and number of passengers) and technology. Electricity demand estimate was based on Metrolinx’s GO electrification study and traction power consumptions of existing transit systems such as TTC and CTrain. 18

On the current path, the renewable share of Ontario’s total electricity production will have increased by 20 percentage points between 2005 and 2035: a doubling. The nuclear share will have declined by 20 percentage points from today’s level.

~20% ~30%

~40%

~20% ~10%

~50%

Note: values in figure above are rounded

~10% ~20%

~60% ~40%

19

Ontario’s resource requirement is the amount of available capacity required to meet the NPCC reliability criterion of an annual loss of load expectation of 0.1 days per year. The resource requirement includes some available capacity that is in excess of Ontario’s demand. The fraction of the resource requirement that is in excess of Ontario’s demand is referred to as the “reserve margin” or “planning reserve”. Ontario’s target reserve margin reflects the expected internal supply mix, forecast demand levels and their uncertainties, major transmission limits and both scheduled and unscheduled resource outages. 35

Resource Requirement 30

Reserve Margin

Demand (GW)

Net of Conservation

25

20

Peak Demand

15 Planning Reserve Margin 10

5

Summer Peak Demand (after conservation) Summer Resource Requirement (Demand + Planning Reserve)

0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

20

While Ontario’s installed capacity is about 39 GW, the contribution of that capacity during peak periods (a.k.a. the “effective contribution”) tends to be lower due to temperature and weather effects. Although contributions vary by individual technology, the effective contribution of Ontario’s supply mix as a whole is about one third lower than its installed capacity. The effective contribution of Ontario’s supply mix is generally higher in the winter than in the summer. 45

Capacity (GW)

40

35

30

Installed Capacity

25

Capacity Contribution to Summer Peak Capacity Contribution to Winter Peak 20 2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

21

Contribution at Time of Summer Peak (GW)

Ontario will have sufficient supply over the next decade. Additional resources may eventually be required. Needs have been reduced and deferred since LTEP 2013. 35

Summer Peak Demand

Additional resources needed to meet resource requirement

Summer Resource Requirement

30 25

Resources with expired IESO contracts Directed

20

15

Committed

10 5

Existing

0 2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

6

Resources Above Requirement at Time of Summer Peak (GW)

4 2 0 -2 -4 -6 -8

-10

Existing, Committed & Directed Capacity (excludes expired contracts) Existing, Committed, Directed and "Assumed" Capacity (includes expired contracts)

-12

22

Longer-term CO2 emissions will remain well below historic levels, but will fluctuate in step with production from Ontario’s natural gas-fired fleet. Natural gas-fired generation will tend to be highest when nuclear output is lowest, such as during refurbishments and upon Pickering retirement. Ontario Electricity Sector CO2 Emissions (MT)

40 35 30 25 20 15

Range with/ without emissions from imports

10 5 0

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

23

Future transmission investments will be influenced by changes in demand/supply patterns, customer choice and regional planning, and performance of existing assets/end of life considerations. Some current initiatives are identified below.

Current transmission planning initiatives 1 East-West Tie 2 Line to Pickle Lake 3 Remote Communities Connection Plan 4 Northwest Bulk Transmission Line 5 Supply to Essex County Transmission Reinforcement 6 West GTA Bulk Reinforcement 7 GTA West Transmission Corridor 8 Guelph Area Transmission Refurbishment 9 Special Protection Systems 10 Clarington TS 11 Quebec Interconnection Reinforcement

24

While Ontario will remain adequately supplied for at least the next decade, its supply system will soon enter a period of sizeable and rapid transition. The transition will introduce some prospect of implementation, performance and availability risk and will require our attention

Resources Above Requirement at Time of Summer Peak (GW)

3

2

1

0

A Moving Target -1

-2

-3 2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

25

One aspect of the upcoming transition relates to the substantial resource turnover anticipated in coming years. The turnover will be driven by nuclear retirements, nuclear refurbishments and by the commissioning of substantial amounts of renewable and natural gas-fired resources. Together, all of this presents some risk of a “many moving pieces” variety. Installed Capacity Turnover, 2016 - 2035 (MW)

10 8 6 +8

4 2

+4

0

-3

-2 -4

+4

-1

-8

-6 -8

-10

Refurbishment outages at Bruce and Darlington

Pickering Retirement

Non-Utility Generator Committed Resources Contracts Reach Term

Directed Resources

Returns from RefurbishmentOutages at Bruce and Darlington

26

The figure below illustrates the tightly coupled nature of the planned nuclear refurbishment programme: many refurbishment outages in a relatively short period of time, sometimes in parallel 2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2031 2032

2033

2034

Bruce 1 Bruce 2 Bruce 3 Bruce 4

Bruce 5 Bruce 6 Bruce 7 Bruce 8 Darlington 1 Darlington 2 Darlington 3

Darlington 4 Pickering 1 Pickering 4 Pickering 5 Pickering 6 Pickering 7 Pickering 8 2015

2016

2017 2018

2019

2020

2021 2022

2023

Refurbishment Outage

2024

2025 2026 2027

2028

2029 2030

Projected End of Service

27

While the turnover risk described stems from a variety of resource types, some pose greater overall risk than others and call for prioritized focus in risk assessment and mitigation planning. Nuclear refurbishments are a prominent example.

28

The effect of ageing on generator reliability is another issue to watch. As illustrated in the figure below, generator reliability can change over time. “Breaking in” failures are of particular concern during a unit’s infancy, “wearing out” failures are of particular concern during a unit’s twighlight years.

Forced Outage Rate

Decreasing Forced Outage Rate

Constant Forced Outage Rate

Increasing Forced Outage Rate

Wear Out Failures

Breaking In Failures

Time This type of figure is sometimes referred to as a “bathtub curve” 29

The issue of ageing is relevant in light of the “demographic” distribution of Ontario's generator fleet: about 40% of Ontario’s total capacity is less than 15 years old, about 45% of Ontario’s capacity is greater than 30 years old Cumulative Installed Capacity (%)

100%

Biomass

90%

Solar

80%

Wind

70%

Water

60%

Gas

50%

Nuclear

40% 30% 20% 10% 0%